Creating a Trust Is Only the Beginning: Why Trust Funding Still Matters
Many people — including attorneys — perpetuate the myth that once a trust is created, the entire act of estate planning is complete. Yes, it’s a great first step and a meaningful accomplishment, but the reality is this:
People come and go from our lives, laws change, and your estate plan must evolve with them.
When estate plans have not been reviewed or updated in decades, one of the most common (and costly) mistakes I see as an estate-planning attorney is a failure to properly fund the trust.
The Most Common Trust Funding Mistake: Real Property
A particularly frequent issue involves a home.
A house may initially be transferred into a revocable living trust, but later—often during a refinance or loan modification—it is taken out of the trust and placed back into the individual’s personal name. Years later, when the grantor passes away, the successor trustee (often a child) discovers that:
The trust exists — but the house is no longer in it.
This mistake has serious consequences:
- It delays the trustee’s ability to sell or rent the property
- It increases legal costs
- And most importantly, it can subject the home to probate, defeating one of the main reasons the trust was created in the first place
Why Trusts Normally Avoid Probate
Creating a trust is a popular way to avoid probate because assets held in trust:
- Pass privately
- Are administered by a successor trustee
- Do not require court supervision
Once an asset is transferred into a trust, it is owned by the trustee, not the individual personally. In a revocable living trust, you are usually the first trustee—but legally, the trust is the owner.
Because probate only applies to assets owned personally at death, properly funded trust assets bypass probate entirely.
When the House Is Still in the Decedent’s Name
If you find yourself acting as trustee and discover that the house is still titled in the decedent’s individual name, all is not necessarily lost. In certain situations, California law may offer alternatives to a full probate.
Two common scenarios come up:
- The trust terms specifically describe the property and clearly state the decedent’s intent that it be held in trust
- The property qualifies under California’s small-estate rules for a primary residence
Let’s walk through both.
Scenario 1: The Trust Mentions the Property (Heggstad Petition)
If the trust document specifically identifies the property and expresses the intent that it be held in trust, the trustee may be able to file a Heggstad petition under California Probate Code § 850.
A Heggstad petition asks the court to confirm that the property is, in fact, a trust asset—even though the deed was never properly transferred.
Important points to know:
- This still requires a probate court filing
- It is not a full probate
- It is generally faster, cheaper, and more limited in scope
- Once granted, the court order allows the trustee to record the property into the trust
This remedy is often available when the trust was properly drafted but poorly funded.
Scenario 2: Small-Estate Rules for a Primary Residence
If the home was the decedent’s primary residence, and:
- The fair market value is under $750,000, and
- The decedent died on or after April 1, 2025
then the property may qualify for California’s simplified real-property transfer procedure, rather than a full probate.
Under this process, eligible successors can use a court petition or affidavit-based procedure (depending on circumstances) to transfer title without opening a traditional probate case.
This option is highly technical and timing-sensitive, and mistakes can invalidate the transfer—so legal guidance is strongly recommended.
The Takeaway
A trust is not a “set it and forget it” document.
- Trusts must be funded
- Funding must be maintained
- And estate plans should be reviewed periodically, especially after refinancing, major life events, or changes in the law
If you are a trustee dealing with a house outside the trust—or a homeowner wondering whether your trust is actually funded—addressing the issue early can save months of delay and tens of thousands of dollars later.
William Ha is a California-licensed estate planning attorney. This article is for informational purposes only and is not legal advice. Every situation is different, and you should consult an attorney about your specific circumstances.